Revising History: The Crash of '83

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Have tales of the gaming apocalypse been exaggerated?

By Travis Fahs

At a certain point, history becomes fable, and complex causes and subtle conflicts are distilled into storybook tales of heroes and villains. History buffs know that Abraham Lincoln had more reasons than just ethical principle for abolishing slavery, and we know that Ghandi may not have felt all people deserved the same equality as his people, but that isn't what you hear in the fifth grade history class. Videogame history is no different. The victors write the history books and the popular story is, over time, accepted as fact.

No legend is more famous than the story of the great crash of 1983. The industry lay in ruins, gaming was declared a fad by the media and left for dead. The shelves were all lined with nothing of value, and the once-beloved characters E.T. and Pac-Man became symbols for a floundering company. A weary public moved on, until Nintendo arrived to save the industry from certain doom. "Had they not been there, you wouldn't be playing games today," many have claimed over the years. This sentiment has been echoed time and time again, not just on message boards and in schoolyards, but in major magazines, books, and websites.

But rest assured, it is one heaping load of crap. Not only would the industry have survived and thrived, but the extent to which there really was an industry-wide crash outside of Atari is highly suspect, as are many of the cited causal factors for the downturn. It's worth looking past the five o'clock news version of this story to take a closer look at what really happened.

The legend in detail: No one can deny that there was a major crash of some sort. The information is clear: Atari went from the fastest growing company in US history (at the time) to a giant money sink, losing $500 million in 1983. It was a spectacular and precipitous drop off, the likes of which the industry has never seen since. Their fall alone could be measured as a crash of the console industry, but this is a misleading way to interpret the facts.

But the story tells us that they were not the only ones affected. A number of other consoles met their demise during this Dark Age. ColecoVision, Vectrex, and even the mighty Intellivision were put out to pasture. Third parties, now legally sanctioned thanks to Atari's courtroom loss to Activision, popped up all over and many failed not long after.

Pac-Man's port was lousy, but Atari released plenty of great ports alongside it.

The reasons for this, we are told, are largely the fault of a lack of quality products. Atari was churning out a number of poor games, though the only ones you'll ever hear mentioned specifically are E.T. and Pac-Man, as well as the occasional mention of the cheesy adult games that scarcely anyone knew existed until history made them infamous. We are also led to believe that an abundance of competition diluted the market and alienated consumers. In more recent years, there has been more talk about the competition from computers as a major factor.

To some extent, all these arguments have some truth to them. They do describe actual market conditions, but there are some leaps of logic made in establishing a cause and effect relationship, and none of them were unique to that specific time period – even the combination of all those factors has happened since without resulting in a crash.

Another View

By 1983, Atari alone accounted for the vast majority of console gaming business. Their steep, sudden downward decline left a smoldering financial crater in the industry that no one was immediately prepared – or able – to fill. In fact, Atari continued to dominate the console market even as they hemorrhaged money due to bad business practices. They sold millions of games, as did their leading third party, Activision, which made them quite the behemoth to compete with, even if they were unprofitable.

Even as sales did decline (as we now know they do cyclically as every console crosses five years of age), there wasn't a successor ready to fill the void just yet. There was no serious next generation competition until Nintendo arrived on the market in 1985. Their success is not a miraculous comeback for the business, but proof positive that the market had been there all along, waiting for a real next-gen machine. The notion that the industry was on its way out was a construction of sensationalist news media, and while the paranoia on the part of retailers was real, it doesn't mean that they were right. History has proven them wrong.

So let's blow up the existing ideas about why the crash itself happened and see if we can't get a clearer view of history.